ACCT 2810 MILLER EXAM 2 | LATEST
STUDY SET | QUESTIONS AND
VERIFIED ANSWERS
service businesses - ANSW--Revenue activities involve providing services to customers.-Example: Family
Health Care, P.C.
Retail Operations - ANSW--Merchandisers
-Revenue activities involve the buying and selling of merchandise.
-Example: Home Depot Inc.
gross profit - ANSW-net sales - cost of goods sold
net sales - ANSW-sales revenue less returns and discounts
Cost of Goods Sold - ANSW-cost paid for merchandise that was sold
periodic system - ANSW-Inventory records are updated "periodically".
-Inventory purchases recorded in "Purchases" account
-No entry to adjust inventory at point of sale
-Ending inventory count is used to determine COGS at the end of the period
Perpetual System - ANSW-Inventory records are updated at the point of sale.
-Inventory purchases are recorded in "Inventory" account"Inventory" account is adjusted at point of sale
-Inventory account balance shows what inventory should be on hand at any point in the period. (Balance
in the inventory account is kept up to date "perpetually".)
discounts - ANSW-Received by buyers for making an early payment of an invoice
credit terms - ANSW-2/10, n30
-Refers to the timing of when payments for merchandise are to be made, agreed on by the buyer and the
seller
-If payment is required on delivery, the terms are cash or net cash
-Buyer should make the payments within a credit period
fob - ANSW-free on board
FOB destination - ANSW-Title passes from the seller to the buyer when the goods are delivered to the
buyer.
FOB shipping point - ANSW-title passes when the seller ships the inventory, not when the buyer receives
it.
adjustments for retail operations - ANSW-inventory shrinkage, Estimated customer refunds and
allowances, Estimated customer merchandise returns
customer refunds payable - ANSW-estimate is used in the adjusting process to record a liability
estimated returns inventory - ANSW-inventory expected to be returned in the future
-Estimated at the end of the period as part of the adjusting process
cash sale - ANSW-Seller collects the sales tax
, Sale made on account - ANSW-Seller charges the buyer by increasing Accounts Receivable
Inventory Shrinkage - ANSW-Difference between the balance of Merchandise Inventory and the physical
inventory on hand at the end of the accounting period
Multiple-Step Income Statement Format - ANSW--Cost of goods sold
-Gross profit
-Income from operations
-Selling expenses
-Administrative expenses
-Other revenue
-Other expense
Single-Step Income Statement for Retail Company - ANSW--Revenue
-expenses
-net income
Objectives of Internal Control - ANSW-safeguard assets, accurate information, compliance with laws and
regulations
elements of internal control - ANSW-control environment, risk assessment, control activities, information
and communication, monitoring
control enviroment - ANSW--Overall attitude of the management and the employees about the
importance of controls
-factors that influence a company's control environment
-Management's philosophy and operating style
-Company's organizational structure
-Company's personnel policies
risk assessment - ANSW--Management should:
-Identify risks and analyze their significance
-Assess the probability of the occurrence of risks
-Take necessary actions to minimize risks
Control Procedures - ANSW--Provide reasonable assurance that business goals will be achieved
-Include:
-Competent personnel, rotating duties, and mandatory vacations
-Separating responsibilities for related operations
-Separating operations, custody of assets, and accounting
-Proofs and security measures
human element of controls - ANSW-fatigue, carelessness, confusion, or misjudgment can cause human
errors
Cost-benefit considerations - ANSW-Costs of internal controls should not exceed their benefits
voucher - ANSW-Any document that serves as a proof of authority to pay cash or issue an electronic
funds transfer (EFT)
STUDY SET | QUESTIONS AND
VERIFIED ANSWERS
service businesses - ANSW--Revenue activities involve providing services to customers.-Example: Family
Health Care, P.C.
Retail Operations - ANSW--Merchandisers
-Revenue activities involve the buying and selling of merchandise.
-Example: Home Depot Inc.
gross profit - ANSW-net sales - cost of goods sold
net sales - ANSW-sales revenue less returns and discounts
Cost of Goods Sold - ANSW-cost paid for merchandise that was sold
periodic system - ANSW-Inventory records are updated "periodically".
-Inventory purchases recorded in "Purchases" account
-No entry to adjust inventory at point of sale
-Ending inventory count is used to determine COGS at the end of the period
Perpetual System - ANSW-Inventory records are updated at the point of sale.
-Inventory purchases are recorded in "Inventory" account"Inventory" account is adjusted at point of sale
-Inventory account balance shows what inventory should be on hand at any point in the period. (Balance
in the inventory account is kept up to date "perpetually".)
discounts - ANSW-Received by buyers for making an early payment of an invoice
credit terms - ANSW-2/10, n30
-Refers to the timing of when payments for merchandise are to be made, agreed on by the buyer and the
seller
-If payment is required on delivery, the terms are cash or net cash
-Buyer should make the payments within a credit period
fob - ANSW-free on board
FOB destination - ANSW-Title passes from the seller to the buyer when the goods are delivered to the
buyer.
FOB shipping point - ANSW-title passes when the seller ships the inventory, not when the buyer receives
it.
adjustments for retail operations - ANSW-inventory shrinkage, Estimated customer refunds and
allowances, Estimated customer merchandise returns
customer refunds payable - ANSW-estimate is used in the adjusting process to record a liability
estimated returns inventory - ANSW-inventory expected to be returned in the future
-Estimated at the end of the period as part of the adjusting process
cash sale - ANSW-Seller collects the sales tax
, Sale made on account - ANSW-Seller charges the buyer by increasing Accounts Receivable
Inventory Shrinkage - ANSW-Difference between the balance of Merchandise Inventory and the physical
inventory on hand at the end of the accounting period
Multiple-Step Income Statement Format - ANSW--Cost of goods sold
-Gross profit
-Income from operations
-Selling expenses
-Administrative expenses
-Other revenue
-Other expense
Single-Step Income Statement for Retail Company - ANSW--Revenue
-expenses
-net income
Objectives of Internal Control - ANSW-safeguard assets, accurate information, compliance with laws and
regulations
elements of internal control - ANSW-control environment, risk assessment, control activities, information
and communication, monitoring
control enviroment - ANSW--Overall attitude of the management and the employees about the
importance of controls
-factors that influence a company's control environment
-Management's philosophy and operating style
-Company's organizational structure
-Company's personnel policies
risk assessment - ANSW--Management should:
-Identify risks and analyze their significance
-Assess the probability of the occurrence of risks
-Take necessary actions to minimize risks
Control Procedures - ANSW--Provide reasonable assurance that business goals will be achieved
-Include:
-Competent personnel, rotating duties, and mandatory vacations
-Separating responsibilities for related operations
-Separating operations, custody of assets, and accounting
-Proofs and security measures
human element of controls - ANSW-fatigue, carelessness, confusion, or misjudgment can cause human
errors
Cost-benefit considerations - ANSW-Costs of internal controls should not exceed their benefits
voucher - ANSW-Any document that serves as a proof of authority to pay cash or issue an electronic
funds transfer (EFT)
